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Posted on 01/29/2003 2:35:39 AM PST by kattracks

Editor's Note: This is the second of a three-part series examining the current difficulties facing Big Tobacco and the cigarette-buying public.)

(CNSNews.com) - States will collect more than $20 billion from tobacco companies and smokers this year, yet little of that money will go to prevent youth smoking as was originally intended.

The money technically does not have to be spent on tobacco prevention programs, but when 46 state attorneys general reached a settlement with Big Tobacco in 1998, they indicated that is were it would go.

In that time, youth smoking rates have declined, according to estimates from tobacco companies and anti-smoking groups, but an average of 430,000 people still die each year from tobacco-related causes.

This year states will take in $8.7 billion from the tobacco settlement, while the other $11.6 billion will be generated from excise taxes on cigarettes. Most of the taxes were implemented because of budget shortfalls and will be used to shore up deficits, not help people quit smoking or prevent kids from starting in the first place.

Anti-smoking groups have expressed their displeasure over these spending prerogatives and have a surprising ally in their campaign: Big Tobacco.

A Different Approach

Since signing the Master Settlement Agreement in 1998 with 46 states, tobacco companies have changed their tune about the dangers of smoking.

It was in the late 1990s when Big Tobacco decided it was time to put an end to lawsuits brought by state attorneys general. The settlement they reached, known as the MSA, cost the tobacco industry $206 billion over 25 years. Four other states -- Florida, Minnesota, Mississippi and Texas -- had previously reached settlements for $40 billion.

Besides forking over the $246 billion, Big Tobacco acknowledged the harm caused by smoking cigarettes -- a departure from years earlier when tobacco company officials swore before Congress that they did not believe the nicotine in cigarettes was addictive.

More than four years after the November 1998 settlement, the companies now tout their sense of responsibility as much as their profitability.

"Being successful goes hand in hand with being responsible," said Jaime Drogin, spokeswoman for Philip Morris USA, the domestic tobacco division of the newly named parent organization, Altria Group, Inc.

"We're being successful at being responsible," Drogin said. "It's important that just as we talk about the success in terms of dollars and cents that we also talk about the success in terms of overall corporate responsibility."

Like Philip Morris, its chief competitors R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Corp. have change their operations to reflect a different marketplace -- one that is more skeptical of Big Tobacco.

The decision by the tobacco companies to change their image was spurred on by the settlement, which required states to place a top executive in charge of youth smoking prevention, among other things, said Lyndon Haviland, chief operating officer at the American Legacy Foundation, an anti-smoking group.

But cigarettes remain addictive, Haviland warned. She cited figures showing that 70 percent of the 46 million smokers in the United States want to quit, but need an extra boost. That is where she said state tobacco prevention programs come in.

"There's no way to address the fact that more than 430,000 people die each year in the United States from tobacco-related illnesses. It's the single largest preventable cause of death in this country. It's a public health tragedy and it's an epidemic. For states not to address that, they are causing additional expenses, and frankly, tearing families apart."

The American Legacy Foundation was born as a result of the settlement. It serves as an educational organization that is best known for the "truth" commercials that have aired on television over the last few years.

But the foundation also faces some daunting challenges ahead. This spring it will receive its last $300 million payment from Big Tobacco, based on a provision in the MSA.

The group will not disappear, though. It has several allies in the anti-smoking movement that advocate prevention and cessation programs, including the Campaign for Tobacco-Free Kids, American Lung Association, American Cancer Society and American Heart Association.

Even Big Tobacco claims to be an ally when it comes to children.

"At the end of the day, Philip Morris shares a common goal with all these organizations to prevent youth smoking," Drogin said. "While we recognize there may be some skepticism about our efforts, we hope over the long term that we'll be judged by the effectiveness of our efforts. It's really our hope that all of the groups that share this goal will be able to work together."

States Accused of Hypocrisy

At the time of the tobacco settlement in 1998, state attorneys general claimed the rising cost of tobacco-related health problems forced them to sue for damages. They used the occasion to also vow to spend money to prevent children from smoking and help adults kick the habit.

Most states spend at least some money -- although only a sliver of their tobacco-generated revenue -- on programs or initiatives proven to reduce smoking.

But three states, Michigan, Missouri and Tennessee, as well as the District of Columbia, will not spend a penny on tobacco prevention this year, according to the Campaign for Tobacco-Free Kids. Others have locked up or securitized the money to be used in the future, the report stated.

Geralyn Lasher, spokeswoman for the Michigan Department of Community Health, called
the report "simply untrue." She said the state had tobacco prevention programs in place before the settlement, and currently uses revenue generated from cigarette taxes and the MSA to fund them.

The Campaign for Tobacco-Free Kids, working in conjunction with other anti-smoking groups, issues updates twice a year on the status of tobacco prevention programs. In the report released last week, the campaign saved its harshest criticism for two states that had long championed tobacco prevention initiatives.

Those states, California and Massachusetts, are also facing some of the biggest budget deficits.

Before their programs were cut, California spent $134.5 million on prevention, while Massachusetts dedicated $48 million. This year, California has cut its spending back to $88.3 million, while Massachusetts slashed its funding by 90 percent to $4.8 million.

Deborah Klein Walker, an associate commissioner for the Massachusetts Department of Public Health, said legislators needed to make cuts last year and one of them happened to be smoking prevention programs.

Cassandra Welch, director of field advocacy for the American Lung Association, said it was disappointing that states, which originally led the way in tobacco prevention, are now cutting back. By taking that route, she said, the financial burden will worsen in the future.

"We believe this is short-sighted fiscal thinking on the part of the states," she said. "Tobacco prevention programs have proven to be successful -- not only protecting the health of people, but also by saving states money."

The tactics used by the anti-smoking groups and Big Tobacco in their unusual alliance have also come under fire.

An international smokers' rights group called FORCES has attempted to render the MSA invalid. The group has filed a federal lawsuit that is pending before the U.S. Court of Appeals for the Ninth Circuit.

Enoch Ludlow, president of FORCES USA, faulted Big Tobacco for entering into the agreement. His main contention is the disproportionate impact the settlement has had on smokers. He said states have used it to advance their cause against Big Tobacco, even though the tobacco companies have simply passed the costs associated with the settlement on to their smoking customers.

"Each time the attorneys general get up and say they are kicking the tobacco industry in the teeth, they are lying," Ludlow said. "It was definitely a mutual agreement between the 50 attorneys general and the tobacco industry that completely bypassed any legislative process, and that's pretty dangerous."

Nevertheless, R.J. Reynolds spokesman John Singleton said tobacco companies remain committed to spending money on youth prevention programs.

"We would like to see that money being spent on tobacco control as opposed to the ways it's being spent, which in numerous ways has nothing to do with tobacco control," he said.

Tomorrow: Big Tobacco took a big financial hit in 2002, and the tough times could last well into 2003.

Part One: Hostility from States, Smokers Clouds Big Tobacco's Future

E-mail a news tip to Robert B. Bluey.

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